Washington stalemate sinks US stocks

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US stocks sank and short-term bond yields jumped Tuesday as the stalemate in Washington over passing a budget and raising the debt ceiling took a deeper toll on financial markets.

Investors sold off a wide range of high-flying tech stocks especially as President Barack Obama toughened his line on negotiating with Republicans, saying he would not bow to extortion.

That reflected growing nervousness about the potential for the government to default on some obligations if the debt ceiling is not hiked by October 17.

"Given that there's nothing but animosity coming from Washington, people are selling off," said Michael James of Wedbush Securities.

"If we can't get an agreement on the government shutdown, it's much more likely we can't reach an agreement on the much more serious debt ceiling, and if that's the case, that would be very, very negative for our markets and worldwide markets."

Facebook was lost 6.7 per cent, LinkedIn 6.1 per cent, Netflix 5.0 per cent and Yahoo 3.5 per cent.